And so that mid-teens and we kind of call it 14% to 16%, clearly, we’re knocking at the bottom end of that range rather than the middle or going beyond as we would have ideally desired. I think a little bit of inflation over the last couple of years is sticking. That’s definitely kind of an increased headwind compared to past margins. Labor was slightly inflated, but certainly some raw materials around the edges have caused some headwinds as well as some of the energy costs, which are not increasing today, but they certainly haven’t returned to sort of pre-pandemic lower cost levels. I mean if you’re really then looking back to 2016, 2017 margin, we’ve got another $50 million or $60 million of depreciation today, again, ready to support that higher ramp.
But I mean that will give you at least 200 basis points of difference in our margin performance. So when you add all that together, we believe our underlying performance is moving in the right direction. We’re certainly strongly positioned and very deliberately positioned for the growth ahead as we move through 2024 and into the back half of 2024, we will be driving those margins and the leverage as strong as we can.
David Strauss: Thank you very much.
Operator: We’ll go next to Bert Subin at Stifel.
Bert Subin: Hey. Good morning and thanks for the question.
Patrick Winterlich: Good morning.
Bert Subin: Patrick, just following up on that. As we think further out, I guess, would you say there’s anything structurally different about the business today as you think about Hexcel’s ability to get back to that margin profile once sales are back to those same levels. Is it — I guess you noted deflation as a headwind, potentially some material costs. Are there other things like mix, competition or a different view on production potential that impact where you think you’re heading?
Patrick Winterlich: No. We’re absolutely driving back to where we were historically. Now it’s taking longer. Now that’s frustrating us. It’s clearly frustrating you. But we are very deliberately there to support our customers. We’ve got the infrastructure in. We have this headwind, which was never going to just be one quarter. It was always going to be a period of time. But yes, we are confident that when the top-line continues to grow and the ramp rates continue to come true, there’s no fundamental mix change. There’s no kind of competition shift. We are just as well-positioned as we were historically to bring through our products, to drive leverage, but we have to get that top-line coverage. We’ve got to cover that depreciation I just mentioned, which is obviously higher.
And we have to get that — sort of leverage over our overhead, that basic sort of economies of scale leverage. And that will come. It will come as we drive through, as I say, the back half of 2024 and then we go into 2025, we will be driving back to those historic levels of margins.
Bert Subin: Got it. Okay. On the — just as a follow-up on the other two segments, Space & Defense and Industrial. Space & Defense coming off of a really strong year and sort of talking about maybe a little bit of lower growth there. And then Industrial coming off a weaker year and a little bit of a rebound. Can you just talk through the dynamics of your expectations and what you guided there?
Patrick Winterlich: Yes, sure. So, in Space & Defense, I mean, 2023, quite honestly, was an extraordinary year at 17%. I’m sure that’s certainly a record in my time and I think we’d have to look back a long time in Hexcel’s history to find another year of such growth. There was just very solid growth across a number of platforms. We called out helicopters. We called out the classified, a lot of one-time buys there, which really do help and then just general strength in the fixed-wing fighter jets. So, very, very solid. Now, as we go look forward, we continue to be confident. It’s a great market for us and we’re driving growth opportunities, CH-53K sort of down the road, the V280, but many sort of smaller platforms as well where we can penetrate.
So, we’re calling mid-single-digits. We think that’s sensible. Obviously, there’s budget challenges and other sort of geopolitical aspects to it, which make Military and Space & Defense from time-to-time lumpy, as you know, but anyway, another solid year of mid-single-digit growth. Industrial, clearly, 2023 was a tough year. Probably the first time wind has been mentioned today. They are just mentioned that. Wind is now a much smaller sort of factor in our Industrial segment. But it’s come down dramatically and perhaps a little bit faster than we even expected over the last couple of years. That really is now going to stabilize, we believe. Automotive is now our largest industrial submarket. We’re seeing nice growth in high-end cars, aesthetic detail, carbon fiber wheels as I think, Nick mentioned.
So, we’re positive and we see continued investments. And then around things like Marine and other pure industrial plays, we will be very focused, very targeted on value-add plays. So, we don’t see the sector going down further. We don’t see dramatic growth. We see some small growth ahead, but hopefully no more declines.
